Second mortgages are a key financial tool that can help homeowners raise funds to finance big projects at lower interest rates. Understanding how second mortgages work, how to get a second mortgage, and the best uses to which a second mortgage can be put can give you a huge financial edge when it comes to making smart investments.
But answering the question of how to get a second mortgage will be different depending on your circumstances, and the particular reasons you have for wanting to borrow.
For example, a homeowner with great credit who simply wants to borrow enough money to cover routine repairs is not going to have the same needs as a homeowner with ambitious plans to use their current home equity to fund the purchase of a second property.
Just as there are many benefits of a second mortgage there are also many differences in how the application process can work. This blog will outline five of the most important things to know about getting a second mortgage based on the unique situations different homeowners find themselves in.
1. Getting a Second Mortgage for Debt Consolidation
One of the most common reasons people get second mortgages in Toronto is so they can consolidate high-interest unsecured debts like credit cards, auto loans, and payday loans into a single more manageable monthly payment.
If you want to find out how to get a second home mortgage for debt consolidation purposes, you will want to find out exactly how much you need to borrow in order to cover your original debts. You may also want to consider settling on an agreement that will allow you to pay the money off over a longer time frame — the last thing you want is to fall behind on your payments again and have to borrow more down the road.
In Canada, it is possible to negotiate a home equity loan with a repayment plan of up to thirty years, so if you’re borrowing for debt consolidation reasons, it’s a good idea to secure a lower monthly payment over a longer period of time so you can get your finances back on track.
2. Getting a Second Mortgage for Renovations and Maintenance
In Canada, summer is the season for renovation projects and home maintenance. But many homeowners don’t necessarily have the tens of thousands of a dollars a bathroom remodel or extensive foundation work can cost. A second mortgage or home equity loan is a great way to cover these expenses (you can read more about second mortgages vs. home equity loans here).
When taking out a second mortgage to cover renovations and repairs, it’s a good idea to only borrow as much as you need. This will help you repay the second mortgage more quickly so you can get back to paying down the original mortgage as soon as possible.
3. Getting a Second Mortgage to Invest in Property
Another common reason to leverage home equity through a second mortgage is to invest in other properties. Given the speed at which house prices are rising in Toronto, going further into debt to buy up property can be a savvy investment, and a smart way to start building a real estate profile.
People who are taking out a second mortgage on their initial property so they can put a down payment on another are usually looking to borrow the maximum amount they can, in which case the specifics of how much home equity they have becomes more significant.
At Burke Financial, we can offer up to 85% loan-to-value, meaning that your second mortgage can unlock 85% of the total value of the equity you own in your home. If you want to know how to get a second mortgage to buy another house at the best possible rate, start your application today.
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4. Getting a Second Mortgage with Bad Credit
One question mortgage brokers frequently get asked is how to get a second mortgage with bad credit. Typically, if your credit score is below 650, it will hinder your options for borrowing, making it harder to get unsecured loans or credit cards. Because second mortgages are a form of secured debt, backed by an asset, they are an ideal borrowing tool for people with bad credit.
However, the additional risk the lender takes on usually means they can charge more in interest, so if you want to know how to get a second mortgage with bad credit a reasonable interest rate, it’s a good idea to work with a mortgage broker specializing in subprime mortgages who can provide you with the widest possible range of options.
Mortgage brokers like Burke Financial connect you with a range of different lenders, meaning that you have more options to choose between.
5. The Best Way to Get a Second Mortgage
Perhaps the most important aspect of how to get a second home mortgage is related to the application process itself. While it is possible to get a second mortgage through a bank, working with alternative lenders like mortgage brokers expands your range of options.
In addition to banks and other mainstream financial institutions, mortgage brokers can also connect you to provide lenders. Because mortgage brokers don’t sell their own financial products, you can trust them to work on your behalf to find the best possible deal.
At Burke Financial, we also understand that some needs are more urgent than others, and the question of how long does it take to get a second mortgage is an important one. If you need the money for emergency repairs, for example, you don’t want to wait weeks for the application to be approved.
At Burke Financial, we can review your application in a matter of minutes, and in some cases can get you the funds within two business days.
When it comes right down to it, the question of how to get a second mortgage depends in part on your reasons for wanting to get a second mortgage. Whether you are trying to consolidate debt, borrow for a major construction project, or put a down payment on a second property, whether your credit is good or bad, Burke Financial can help you find the lender that is right for you.
With our quick, streamlined application process, we can get you the money you need as soon as you need it, so get in touch with Burke Financial if you want to put your home equity to work this summer.